Ukraine’s PM has announced that Deutsche Bahn will take over control of his nation’s railroad monopoly for a decade. The German firm said it will be consulting Ukraine’s rail company, but wouldn’t confirm any deeper involvement.
Ukrainian Railways and Deutsche Bahn signed a memorandum of understanding this week on the sidelines of the World Economic Forum in Davos. But the otherwise routine event was given extra flair by Ukraine’s Prime Minister Oleksiy Honcharuk, who announced that the deal was much bigger than it appeared. The German company, he said, will take operative control over its Ukrainian counterpart for ten years – or at least that that was Kiev’s intention.
“It’s an ecosystem decision that will show that Ukraine is unprecedentedly open to investment, to peace, to new standards,” the prime minister mused.
His rosy promise, however, was not confirmed by the German side. Deutsche Bahn quickly rejected the idea of taking over its Ukrainian counterpart. A later statement was less categorical, mentioning that the proposed extent of German control was “under discussion.”
Now Ukrainian media are rife with speculation. Honcharuk may have got carried away with wishful thinking or may have confused a consultation with a concession. Or he may have jumped to prematurely confirm an actual leasing agreement in the making.
The head of the Ukrainian government is currently in bad need of good publicity, after an embarrassing near-sacking last week. Honcharuk’s position was in jeopardy after an audio was leaked, in which a group of persons, presumed to be him and his cabinet members, were discussing a plan to misrepresent the state of the national economy to President Volodymyr Zelensky, to convince him that Ukraine is faring better than it actually is. A voice, presumed to be Honcharuk’s, said the president was clueless about economics and confessed that he was not a professional either.
The scandal was somewhat mitigated after the PM offered his resignation to Zelensky, who chose not to forward it to the parliament for approval, and instead gave Honcharuk a second chance.
Ukraine’s economy was hit hard by a political alienation from Russia, which used to be the primary market for many Ukrainian goods before the 2014 crisis. Transport industry and railroads in particular were hurt, too, due to decreased demand for their services and barriers for transit trade imposed by Moscow in response to Kiev’s broad efforts to cut ties with Russia.
The Ukrainian authorities are struggling to offset the damage by attracting foreign investments. The country remains a risky market due to a perceived high level of corruption, problems with protection of property rights, flaws in the justice system and a continued failure to rein in the radical nationalists, who often get away with criminal activities by playing the patriotism card.
Ukrainian Railways is not the only state-owned infrastructure interest in Ukraine that Kiev hopes would benefit from foreign expertise and cash. Zelensky, who also attended the forum in Davos, has touted as a major achievement the looming takeover by a foreign firm of the port in Kherson.
The port was recently leased for 30 years to a Georgian-Swiss company under a newly adopted law on such concessions. The deal is perceived as a pilot project, with similar agreements on other large Ukrainian ports expected soon. Critics of the strategy say Ukraine’s weak state is opening the door to a plunder of state property by big foreign companies.
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